SINGAPORE: Singapore's core inflation dropped 0.2 per cent year-on-year in May, the Monetary Authority of Singapore (MAS) and the Ministry of Trade and Industry (MTI) said in a joint news release on Tuesday (Jun 23).
The drop in May, although less steep than the negative 0.3 per cent in April, is the fourth straight month core inflation has contracted.
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Core inflation - a key policy consideration for the Monetary Authority of Singapore (MAS) - excludes the price of private transport and accommodation.
The headline consumer price index or overall inflation fell 0.8 per cent year-on-year, down from the 0.7 per cent decline in April - which saw a negative reading for headline inflation for the first time since October 2016.
This was mainly driven by a larger decline in private transport costs, at a negative 6.8 per cent in May.
This is in turn attributed to a larger fall in car and petrol prices, as well as the continued suspension of Electronic Road Pricing (ERP) charges lowering private transport costs.
The costs of retail and other goods fell sharply, plunging 2.3 per cent in May, compared to 1.6 per cent in April.
This was due mainly to steeper declines in the prices of clothing & footwear, medical products and household durables. Inflation in personal care products also turned negative.
Accommodation inflation was unchanged at 0.5 per cent as housing rents rose at a steady pace.
The decline in the cost of electricity and gas eased from -5.2 per cent in April to -4.6 per cent in May, as the Open Electricity Market had a smaller dampening effect on electricity prices due to a slowdown in new take‐up rates.
Food inflation rose 2.2 per cent in May, up from 2.1 per cent in April. This was due to a larger increase in the prices of non‐cooked food items.
Services costs fell at a more gradual pace in May at -0.8 per cent compared to April's -1.1 per cent, as holiday expenses and air fares continued declining.
INFLATION "LIKELY TO REMAIN BENIGN"
MTI and MAS expect inflation to remain subdued, with both MAS Core Inflation and CPI‐All Items inflation forecast to average between ‐1 per cent and 0 per cent in 2020.
The agencies say external sources of inflation are "likely to remain benign" amid weak global demand conditions, with oil prices continuing to stay low for an extended period. This will in turn weigh on the prices of energy‐related components.
At the same time, international measures to contain the COVID‐19 outbreak have led to supply chain disruptions, which could continue to put some upward pressure on imported food prices, they said.
In Singapore, consumer demand will be dampened by subdued economic sentiment and weak labour market conditions, resulting in price increases for discretionary goods and services being capped.
Cost pressures are likely to remain low as some degree of spare capacity in the economy emerges.